Unconventional Fuel Production and Water Resources

Crude oil and natural gas production from unconventional reservoirs is experiencing accelerated growth in North America, much of which is expected to continue for the foreseeable future. This shift in the energy industry has been accompanied by rising concerns over its potential impact on water resources. Developing these fuels is thought to require more water per unit of energy produced than conventional sources, while leading to greater degradation of water quality.

In a new paper, together with RFF University Fellow Sheila Olmstead and Senior Fellow and Director of RFF’s Center for Energy Economics and Policy Alan Krupnick, we address these emerging environmental issues, providing a comprehensive overview of the existing literature concerning the water quality and quantity implications of unconventional fossil fuel production in the United States and Canada. We also examine the differences in social costs that arise when obtaining and producing unconventional fossil fuels versus conventional ones, focusing on the extraction and processing phases of shale gas, tight oil, oil sands, and oil shale production. For comparative purposes, we briefly address coal, conventional oil, and conventional natural gas as well.

Our overview of this literature leads to several key conclusions. First, we find that there is no consistent pattern indicating that unconventional fossil fuel production requires significantly more water per unit of energy than conventional fossil fuel production. However, the literature does indicate that the specific location and timing of water use for fuel production matters, and that significant negative, localized impacts are possible as a result of these choices.

We also find that the water quality concerns associated with unconventional fossil fuels are likely to be more serious than water quantity concerns, and more serious for the unconventional than the conventional fuels. Many new extraction and processing technologies created for unconventional fossil fuel production introduce poorly understood contaminant pathways, while the industry’s rapid expansion adds significant uncertainty to potential impacts on water quality.

Although we find few existing studies that directly quantify the social costs and benefits of unconventional production, we provide a rundown of economic studies that can help identify where these costs and benefits are generated. These studies can also help us to approximate how large they might be, given an estimate of the burdens that unconventional development creates.

Ultimately, we find that some characteristics of unconventional fossil fuel production may increase or decrease the social costs of water impacts relative to conventional fuels. These include the rapid pace and growth of production, the ability of communities to adapt to nearby energy development, unique timing issues for water use, and the potential for new technologies that may allow for more sustainable water use. Though the production of these fuels may represent relatively new territory for the industry, an examination of existing literature reveals the resources available to help us understand and predict how development in this sector will progress and help us identify knowledge gaps that need to be filled with further research.

About Yusuke Kuwayama

Yusuke Kuwayama is a fellow at Resources for the Future. His research focuses on the economics of environmental regulation, with an emphasis on water resources and ecosystems.

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